BUDGET DEBATE BEGUN

Press, Volume LXXXVI, Issue 26204, 30 August 1950, Page 8

BUDGET DEBATE BEGUN

PARLIAMENT

Mr Nash Opens Opposition’s Attack USE OF RESERVE BANK CREDIT DISCUSSED (New Zealand Press Association)

WELLINGTON, August 29.

The Prime Minister (Mr Holland) appeared to have held abnormally large cash balances in the State accounts at the end of the financial year on March 31 so as to sustain a case previously made that the Labour Government had issued excessive Reserve Bank credit. This allegation was made by the former Minister of Finance, Mr W. Nash, when he opened the Budget debate in the House of Representatives to-night before crowded galleries. Mr Nash also claimed that from March 31 to August 16, Reserve Bank investments had shrunk by £23,000,000. , Opening his speech, Mr Nash said that the Labour Party Accepted without reservation the view that New Zealand could live only by the goods and services that had been created. The fact was that those goods and services had been created more plentifully in the last 14 years than in any previous period of New Zealand history and the peak of production was reached in Labour s last year of office. It was true that the people* had to pay for what was produced, but they had the money to do so, and the people during Labour’s term of office were better clothed and fed and had more leisure and recreation than previously. That fact haff been given world-wide recognition.

By democratic processes tne National Party had won office, but ‘hose who put the present Government in power should to-day compare what it was doing with whfat its members Lad said in order to win office, and shotlid then decide if they would vote to-day as they did in November. Mr Nash said that Mr Holland in February, in May, and in presenting the Budget last week, had variously claimed that Labour left a deficit of £28.000.000, of £25.000,000 or of £26,000.000.

“I want to affirm that if on March 31 the normal practice had been followed there would have been no substance for the claim that £26,000.000 had been overdrawn from the Reserve Bank,” said Mr Nash.

He added that the Reserve Bank’s own figures showed that on March 31, 1950. the balances under State control were £12,750.000 higher than they were 12 months previously. Yet by August 16 those balances were down |by £11.500,000. and if allowance were made for loan subscriptions paid in by that date the decrease in that period was about On the other hand Reserve Bank in\ estments at March 31, 1949 were £34X00.000. and at March 31, 1950, £43,000.000. On August 16 they had declined to £17.000.000—a drop of £26,000,000 in less than five months. Need Seen for Inquiry There was need, said Mr Nash, for an inquiry into the reasons why Reserve Bank investments were down to £17,000,000 in spite of the previous addition to them of £20,000,000 through I exchange adjustment.' “How much of the State’s investment moneys were held back rather than let them go into the Reserve Bank? It does look as if the moneys were consciously left there to prove a case that had been previously stated.” Mr Nash said that another remarkable thing was that the'cash balances of the State, as shown in the Public Accounts, were £17.000.000 at March 31, 1950. This compared with about £8.000.000 at March 31. 1949. and -was the highest figure he could recollect. It seemed that the cash balances were deliberately kept at high levels to sustain a case previously made but which was wrong—the claim that the Labour Government had drawn fexcessivelv on Reserve Bank credit.

Mr Nash said that he would justify every penny of credit issued by Labour. The Prime Minister had declared that Labour must accent responsibility for the financial position for the whole of the year 1949-50. That meant that Labour must accept —and it did—responsibility for the surplus for the year of £4.300,000 which- the Prime Minister now intended to use to balance his Budget for the current year. He was also using other funds for the same purpose.

Everything that could possbily be done to finance people into houses was done by the Labour Government Mr Nash said. He could justify any credit that Labour might halve used for State housing. He reaffirmed that not one State house would have been built if it were not for credit obtained from the Reserve Bank. It

was entirely and completely incorrect to say that no Reserve Bank credit had been used for State houses, although it had been said that not one State house had beert built since 1935 with Reserve Bank credit. Lifting 'of Land Sales Control Mr Nash said that the abandonment of land sales control had meant a lift irt values according to competent valuers of 40 per cent. State houses on to-day’s market were worth £57,000.000, and they had cost £45,000.000. If anyone had any sense at all he would be wise to stay in a State house. If he did not he would only help to finance some other National Government scheme. Although the Minister of Works (Mr W. S. Goosman) had said that more State houses than ever before would be built this year, 80 per cent, of what would be built had been started before the National Government went i"»to office. He invited the Minister to say how many contracts had been let for new houses since the change of Government. Mr Nash criticised the Government's temporary housing scheme, and predicted that within 10 years they Would develop into slums. Government voices: Oh, no. Mr Nash: I have seen it in the Old Country, and we don’t want that here. We ought not to get on the decline.

Mr Nash added that Government members when in opposition had claimed that the Labour Government had surpluses said to be at £35.000,000, £47.000.000, down to £14.300.000 for one year, all tucked away, and that therefore taxation could be reduced. But in six weeks after taking office the new Government had found a deficiency of £28.750.000.

“Thats’ just camouflage so that they will not have to carry out their promises,” said Mr Nash.

He dealt with debt repayments and the consequent saving in payment of interest, and went on to say that the country had never wanted for anything that mattered. The interest bill on the overseas debt had been halved, and the effect of this successful repayment was that more, not fewer, goods could be imported.

“I want to tell the Prime Minister that if he gets stumped there are some other funds in London he can use,” said Mr Nash, giving details of overseas investments held by the Government Accident Insurance Departmerit, by the Post Office, by the Earthquake Insurance Fund, and other State departments. There was also £10,000,000 of gold in the Reserve Bank. Mr Nash said that the Prime Minister had talked of the imperative necessity for building up the reserve of overseas funds, and then promptly legislated to give control over the reserve to persons who could decide what reserve should be held without any publicity at all. One of the first things those persons would do would be to assume that the Reserve Bank’s gold was worth more than its present valuation in the bank’s balance-sheet.

It should never be forgotten, Mr Nash said, that Labour raised £700.000,000 in this country to finance the war and had repaid two-thirds of the cost of the war. adding only £200.000.000 to the National Debt for war purposes. No other country had done as well.

Mr Nash said that the Government’s land sales policy had added 40 to 50 per cent, to the cost of housebuilding without creating another penny worth of goods. It was merely transferring from those in need to those not in need profits of- several millions arising .from the present house shortage. Budget Provisions Criticised

The provision in the Budget that persons drawing the age benefit should be allowed greater capital sums would bring little actual benefit, he said. The Budget provision allowing age beneficiaries to receive an additional 2s 6d a week of extra income for each year they deferred their application for a benefit was a complete betrayal of Mr Holland's election promise that the benefit itself would be increased bv 2s 6d a week for each year of deferment. The abolition of the differential tax rate on unearned income would benefit only those on high incomes To the man with an income of £3OOO it would save £5OO.

The most astonishing thing was that the National Government, whose members had for six years claimed that Labour was levying taxes the people could not afford to pay, was now increasing total taxes by £8 a head. In a brief reference to subsidies, Mr

Nash said that costs had been added to goods in daily use while slight sales tax concessions had been made on goods seldom bought. Any small concessions were “a butterfly kiss to compensate for the real kick in the pants which the Government has given us by taking off subsidies.” Discussing the concessions to farmers announced in the Budget, Mr nash said that the straight-out 30 per cent, depreciation allowance on new farm equipment should apply equally to all producers—to manufacturers and to workers building their owr homes. One section of .the community should not be selected for such favoured treatment. Farmers were better off than ever thanks largely to Labour’s policies in-the last 14 years. Wool Prices Mr Nash said he was sorry to see wool prices soaring to so high a level. Such high prices were harmful to industry and the Dominion. He thought that woolgrowers .should build up some reserves so that if substitutes for wool came or there was a depreciation in price the growers would have something behind them. All the economy of the country would have to be readjusted to the wool pi ices. They could not afford to have 'me section m complete disparity with another. Discussing New Zealand’s contribution in technical aid to South-East Asia. Mr Nash said that the Government had no vision at all. and the sum of £30.000 which was on the estimates should be 10 times as great or even greater. “There are 1.000,000,000 people who have awoken -to the fact that they have been hungry for 100 2, ears or more and» we have been living on them.” The least contribution New Zealand could make to*vard increasing their living standard was to give not £30.000, not £300,000, but more if we could ‘‘and go tc the limit.” Mr Nash was applauded loudly by his colleagues when he resumed his seat. He spoke for an hour and a half.